Sugar millers not ready for competition

This shortfall is partly addressed by imported volumes from countries like South Africa, India, Tanzania, and Swaziland. Imports hit the 100,000 tonne mark last year, most of it coming into the country for re-export purposes.

Exerts say freeing up the East African sugar market will lead to dumping from countries with less production constraints.

In Uganda, Kakira produces well over half of what is supplied to the market. It is currently at 148,000 metric tonnes as of April this year, while Kinyara and Sugar Corporation last year produced 67,000 and 42,000 tonnes respectively, according to data from Uganda Sugar Cane Technologists Association.

The industry has been undergoing expansion with prudent investment and market drives, but investment capital, infrastructure and cost of power have taken their toll on the millers.

For instance, to ramp up production from under 100,000 tonnes last year to the current 148,000 tonnes, the fully private owned Kakira needed to invest $53 million in new crushing capacity and cane outgrower numbers.

The ownership of other millers is largely private, but they still require the government to inject capital into the businesses to increase production capacity. The government still owns 49 per cent of Kinyara, whose majority shareholding is held by the Rai Group of Kenya and Mauritius.

The government also maintains minority shareholding in Sugar Corporation.

Like other manufacturers, Uganda’s sugar industry too has suffered from the inadequate power supply in the past few years, compelling millers to invest in their own power generation.

But the cost implications for such investments and the emergence of burgeoning markets in the region where a lot of products manufactured in Uganda have been selling meant that the price of sugar shot by 71 per cent in 2005 to Ush2400 ($1.2) from Ush1400 ($0.7) before stabilising around the $1 region.

According to the Uganda Export Promotions Board, 78,000 metric tonnes of Ugandan-made sugar found its way to Sudan, Rwanda, Democratic Republic of Congo, Burundi and Swaziland — all Comesa countries.

To reach optimal production levels and become competitive in the Comesa region, Ugandan sugar millers must increase cane outgrowers — Kakira, for instance is supported by only 6,000 outgrowers, up from 3,500 last year, with a similar tonnage increase in the plant’s crushing capacity.

Similar moves by the other millers will see the industry increase capacity to 300,000 tonnes, which Mr Mubiru says is within reach this year once all millers have completed factory expansion.

The big firms have on top of increasing outgrower numbers also sought other expansion strategies by acquiring land to expand their cane growing functions.

Protectionist Uganda has long suffered jitters over Comesa, first since the bloc announced a free trade area in 2001, and the now the launch of the Customs Union will have brought more fears to the local manufacturers.

Accordingly, the sugar millers under their umbrella bodies — the Uganda Manufacturers Association and the Private Sector Foundation of Uganda have tabled a proposal to the Ministry of Trade, raising concerns over the possibility of sugar dumping that might hurt their firms, especially now that they are expanding their capacities.